Crossing Boundaries to International Production
News of the EEC's policy was frequently reported in the media of Japan and other nations throughout the month of December 1961. The measures Honda would conceive in order to handle the situation were to play a key role in its overseas strategy. During that period, following a meeting in the Executive Boardroom, the topic of conversation between Takeo Fujisawa (then senior managing director) and Hideo Iwamura (then assistant general manager of administration) turned to a possible strategy regarding the EEC. Fujisawa described in considerable detail the present state of the EEC, along with future trends and issues facing Honda in the EEC region.
The exportation of motorcycles to the EEC was rapidly approaching the specified limit, yet even at that point Honda was barely making a profit. Moreover, the high tariffs were threatening to consume even more of the company's earnings. It was feared that motorcycle exports would no longer be feasible as a business when the EEC combined itself into one big market. Therefore, in order that Honda might grow its business on even terms with competitors within the EEC, it was argued that the best measure would be to have Honda produce and sell motorcycles within the region.
Successful production and sales within the EEC could dramatically cut the costs of distribution. Furthermore, the simple increase of locally procured parts to 60 percent of product content would qualify the product as EEC-made, enabling it to be distributed tax-free within the EEC market. After all, Honda motorcycles had already demonstrated their great potential in local race activities, and opportunities were on the increase for the development of a European market.
"So then," said Fujisawa, "you start looking into it right away." With that, Iwamura was instructed to conduct a market survey in the EEC region, under the assumption that Honda would establish a corporation for the local production and sale of motorcycles. Iwamura, surprised by such a sudden turn of events, simply could not hide his bewilderment.
"This is a very important issue concerning Honda's future," he said. "So, let's tackle it by organizing a solid system first."
"I'll leave everything to you," Fujisawa replied. "Feel free to do what you think is best." Following the exchange, Iwamura hurriedly began work on a research project for the EEC region.
By January 1962, Iwamura, along with Kenjiro Okayasu (then manager of Saitama Factory's Direct Materials Section, Materials Division) and Tetsuya Iwase (then chief of the Training Subsection, Personnel Division), organized themselves as the "Special Planning Team for the Corporate Project to Expand into the EEC Region," and began full-scale preparations to conduct the necessary research. There was relevant data to collect with regard to the issue. Yet, for the meantime their research would center on the choice of a candidate site for the construction of a local corporation that could produce and sell motorcycles using materials and labor procured in the area. Moreover, they would need to determine the size of the operation and the types of motorcycles that should be produced. That was no easy task, considering that the EEC was comprised of countries that differed greatly in terms of their policies, economics, market characteristics, languages and customs. It was highly likely that such differences would affect the way any corporation engaged in business there. Moreover, in choosing a site for factory construction it was obvious that the host nation had to be politically stable with a good economic foundation that allowed for the local acquisition of parts. Other factors in the equation were the need for a skilled labor force and a convenient geographic location for corporate activities. Considering the need to satisfy so many conditions, their research took on a wick scope.